UP to half a billion pounds should be diverted from universities to further education college to boost the quality of high level technical courses and “fuel the Northern Powerhouse”, a think-tank has claimed.

A new Policy Exchange report published today has called on the Government to use the next spending review to level the playing field between the higher and further education sectors.

The right-wing think-tank says student loans should be extended to FE students, as well as the introduction of maintenance support. Their report, Higher, Further, Faster, More, says, that while UK universities are some of the best in the world, they are sitting on significant financial reserves, and public spending is currently skewed too much towards higher education to the detriment of further education.

The think-tank says this is hampering the growth of the training desperately needed for a range of technical and professional jobs in the UK labour market.

The report finds that funding for higher education institutions has increased markedly since the introduction of tuition fees, with a rise in overall income of 26 per cent since 2009/10 and universities sitting on £12.3bn of unrestricted reserves – worth around 48 per cent of the entire annual budget for the HE sector.

By contrast, FE colleges have seen a significant drop in their revenue, with the adult skills budget having been cut by 24 per cent since 2009-10. According to the National Audit Office, more than one four of the entire FE college network could effectively go bankrupt within a year.

Earlier this year the Yorkshire Post revealed that funding cuts were placing hundreds of teaching and lecturing jobs in Yorkshire colleges at risk - undermining one of the region’s most successful education sectors,

Yorkshire has the highest proportion of strong performing FE and sixth form colleges in the country.

On Friday the Government announced that seven FE colleges and four sixth form colleges will be involved in a post-16 education and training area review. Similar reviews have taken place elsewhere in the country.

The Policy Exchange has called for the Department for Business Innovation and Sills to redirect up to £532m of the Higher Education Funding Council (HEFCE) grant to improve the quality of higher level technical qualification on offer at FE Colleges, National Colleges and Institutes of Technology. Any remaining grant funding in this area should be directed towards universities with the smallest financial reserves.

Jonathan Simons, head of education at Policy Exchange, said: “The case for training and for skills has never been more important – to help create three million apprenticeships, to fuel the Northern Powerhouse, to boost social mobility and to drive economic growth. The UK is home to world beating universities that we should all be proud of. But as well as degrees, we also need many more people with high class technical and professional skills – and that means a flourishing further education system.

John Widdowson, president of the Association of Colleges said: “The Government must now step up to the plate to ensure that the further education (FE) sector has the funding it so desperately needs to enable colleges to tackle the massive skills challenges faced by this country.

“Policy Exchange makes a strong and convincing case for the Government to rethink funding for post-18 education and training in the upcoming Spending Review.”

“The outdated practice of highly funding our universities whilst continually taking money away from colleges is creating a surplus of graduates and not enough people with the qualifications required for technical and professional jobs, such as engineering and construction.

“Introducing maintenance loans to support FE students aged 19 to 24 would help to reinforce the value of a technical and professional pathway. In addition, if colleges were able to create and award their own higher level technical and professional qualifications, independent of universities, they’d become more accessible and widely available across the country.”

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